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Jerry Neumann is a veteran investor in early stage Internet firms. He cares about the health of the venture capital industry. One of the foundations of a healthy market is the free flow of information about who's doing what deals. Some VC firms rush to publicize their every deal. More don't. What are we market-watchers to do? We could pay five figures for a subscription to Capital IQ. We could cast our fate to wiki-like Crunchbase, but it has reliability issues.

Jerry Neumann

In the interest of greater transparency, two years ago Neumann built a scraper bot that reads every VC firm's Web site at night and Tweets out portfolio changes on @VCDelta. (You could do this with the more general and free tool, Change Detection, too.) It only has a couple thousand followers, which is a testament to its problems that Neumann explained in a blog post earlier this week. In that post he proposed a new "Internet-y" solution that would allow VCs to let the world know what they're doing via a machine-readable, standard format of posting deal info on VC websites.

Here's Jerry explaining why firms should adopt the standard:

"On Monday I proposed an open standard for venture investors to share information. The rationale was to provide more information to the ecosystem in the simplest possible way without creating new gatekeepers.

The first question people asked was whether firms would want to share information. Venture firms are private companies and deals are their proprietary information. They have little legal or ethical obligation to publicize what they do. Historically VCs have avoided the spotlight. Why be open now?

Because it's just good business. Being open about information builds trust between investors and entrepreneurs. Some very successful younger firms--Union Square Ventures and First Round Capital are the most prominent examples--have openness as a core value. Entrepreneurs have all heard stories--perhaps apocryphal--about the unscrupulous VC. They need to know they can trust their investors. Openness is a sought-after attribute. Trust make a difference in the day-to-day relationship between investor and entrepreneur throughout their relationship. Entrepreneurs interpret VC advice as either valuable or self-serving depending on how much they trust their investor. Investors who want to have a constructive impact on their portfolio need to have the founders' trust. Being open about your actions means you are comfortable having your motives open to scrutiny: you are trustworthy.

From another angle, Dan Primack has an interesting take in his recent Andreesen Envy:

Never before has a new VC group grown so quickly, raising nearly $2.5 billion in its first three years of existence. Nor has another VC firm become the industry's undisputed media darling, before having even returned the initial investment on its first fund...

The primary attribute here is access. If Andreessen Horowitz makes an investment, there is a very good chance that reporters will get phone time with Marc Andreessen, Ben Horowitz, Jeff Jordan or whoever else is most appropriate... That may sound obvious, but you'd be amazed how many "brand-name" venture capitalists don't usually give interviews when they do deals. Seriously, how often do you see John Doerr or Mike Moritz quoted about a Series A round? Or even about a fund close?

I'm not trying to say that we're grateful, and thus write nice things. I'm saying that they make a significant effort to disseminate their message, whereas others leave us to our own (often cynical) devices.

It is also clear that a third constituency, the firm's LPs, have begun to take firm visibility into account when choosing which funds to invest in. Now that "proprietary dealflow" has become an oxymoron, it has become more important to consider which investor will be allowed into a hot deal rather than which investor is more likely to see it. VCs that try to stay below the radar hurt themselves in almost every way.

Of course, none of this really applies to Sequoia, KPCB, or Accel. Their brand-names are solid enough to overcome any amount of entrepreneur distrust or media criticism, and solid returns don't hurt. The very top firms don't have to tell anyone anything and it doesn't make a whit of difference. But good marketers know that brands can die much more quickly than they can grow. This goes triple in venture capital. Some of the top venture firms of the 80s and 90s still survive: Institutional Venture Partners, Charles River Ventures, Accel. But what about TVI (hint: backed Microsoft), Merrill Pickard Anderson & Eyre (Benchmark and Foundation spun out of here), Brentwood Capital (investor in Apple and Teradata), Burr, Egan, Deleage, or Sevin Rosen? They made mistakes, young partners left, and the brands quickly disappeared. (Check out a timeline of venture funds here.)

There's a certain amount of hubris in assuming that because you're on top of the world today, you can rest on your branding laurels. Venture capital is a "what have you done for me lately" business. Being an investor in a Google or a Facebook can make you unbeatable for a few months, but that can go as quickly as it came. If you want a brand that survives the inevitable ups and downs of any venture portfolio it has to be based on more than your last exit, it has to be based on a culture that embodies the value propositions that bring you customers through thick and thin. Openness is clearly one of those propositions.

Do I think that all venture firms will be open about their deals? I don't. But I think some of the ones who aren't will one day wish they had decided to build their brand on something as substantial as trust."